Financing furniture is a very common practice, especially now that it is easy to pay $2,000 for a couch, not to mention what outlets are asking for a dining room table. No matter how common it is, the question still remains: is financing furniture a good idea?
When It Makes Sense
Financing furniture makes sense when you are able to take advantage of a zero interest offer. Often, these deals are call ”same-as-cash”. Those deals give you a set number of months to pay the furniture off without having to pay interest, an advantage over putting the furniture on a credit card. It also gives you the flexibility to pay what you can afford each month. For example, if you only have $100 the first month, you do not fall behind. Your only requirement is to pay the entire balance by the end of the zero interest time frame.
When It Doesn’t Make Sense
Looking at the same-as-cash deal again. What happens if you can not pay the balance off in time? You are going to be hit by a HIGH interest rate. It is not uncommon to face 25 percent interest on any balance not paid by the end of the same-as-cash deal. That is enough of a penalty interest rate to make same-as-cash less of a good deal, isn’t it?
Another instance when financing furniture does not make sense is if you must immediately go to a finance company. Again, the problem is the interest rate that you are going to be paying. It would be a miracle if you were charged less than 17 percent. That means that $2,000 couch is going to cost you $2,340. Since most finance companies are not willing to finance furniture for longer than 12 months, you are going to be paying $195 month.
Lastly, you should never finance furniture by using a rent-to-own company. These are the buy-here-pay-here scammers of the furniture world. First off, the furniture is average quality at best, but the company doubles the price to make up for selling it on payments. If you think the selling price is high…the company will charge 100 percent interest for renting it to you. So, that $2,000 couch will cost you $4,000 over the 104 weekly payments you are required to make!
Financing furniture is a good idea when you can take advantage of a zero interest deal and you make sure that you pay the balance in full before the contract time runs out.
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